Too many conservatives getting it wrong on debt commission and taxes

When the Simpson-Bowles Obama Commission “chairman’s mark” came out last week, there were far too many conservatives who were too quick to say nice things about it. Blinded by lower marginal tax rates and some entitlement reforms, they chose to ignore the fact that the plan is a ten-year tax hike of over $1 trillion, and would saddle taxpayers with a taxes-to-GDP ratio of 21 percent, the highest in American history. A week later, the Rivlin-Domenici commission released their report with a $500 billion tax hike. Americans for Tax Reform actually produced our own (balanced) budget plan that cuts spending and cuts taxes in a reasonable way. But it’s worth reflecting on what too many on the Right said about the “higher taxes” plans for almost-balanced budgets.

Let’s start with the conservative publication of record, National Review. In an editorial about Simpson-Bowles, the editors said that the net tax hikes are fine since the code is simpler and rates are lower (though obviously not low enough to make up for the tax increases). NR editor Rich Lowry thinks that a record tax burden of 21 percent of GDP is just fine since the deficit goes down and taxes might be even higher than that someday. Yugoslavia’s Tito took a stronger stand against the Soviets during the Cold War.

This was echoed by Jim Pethokoukis of Reuters who wrote that “taxes probably need to be raised to get Democrats in Congress to approve other deficit-reducing measures that involve cutting spending.” In fact, the only way spending cuts are ever really put on the table is if tax hikes are taken off of it. Politicians will always spend at least as much as the new taxes take in, so higher taxes actually lead away from spending restraint, not toward it. Prior bipartisan budget deals (especially the 1990 Andrews Air Force base deal where President George H.W. Bush broke his “read my lips” pledge) always featured fake spending cuts and real tax hikes. They still do every year in state governments across America.

Supply-side icon Larry Kudlow said that the report was “on the right track” despite a hike in the capital gains tax, mostly because he falsely thinks tax deductions and credits are the exact same thing as spending money on people. Actually, letting people keep their own money is very different than putting them on welfare. Josh Barro of the Manhattan Institute would disagree, viewing higher taxes as acceptable assuming you grew the welfare state at least as much.

There were some plaudits from the Right that were just silly. The College Republican National Committee all but endorsed the plan because it “fixes” Social Security (in a way which raises taxes on younger workers and provides no Social Security personal accounts). I’d like to haggle with them at their next yard sale if that’s the negotiating tactics they bring to the table.

Mostly, though, the support parade came from a series of over-educated and politically-naïve free market economists. Cato’s Jagadeesh Gokhale completely ignores the net tax hike, falsely calling it “reform.” Bush-era Social Security czar Chuck Blahous (as usual) is mostly concerned with the Social Security benefits and revenues lines crossing again into “actuarial balance,” and chooses to view the much higher taxes as acceptable collateral damage. Former Bush aides Greg Mankiw and Glenn Hubbard, as well as the Mercatus Center’s Arnold Kling, couldn’t contain their excitement over the net income tax hike with the inadequately-lower rates.